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What to do with your tax refund?

18 June, 2014

Are you waiting for your refund? On an average, an Australian would get 3000 dollars as tax refund. What are you planning to do with the tax refund? It is always better to use it to pay off any debts or put aside for any emergency uses.

If you want to spend it

If you really want to spend the money, it is better to put it in things that would pay you back in the long run. For instance, you could do some improvement in your house for the winter. This would help you get a return on your money and also helps to reduce your utility bill. You can invest it in a small business or a stock. If you have an outstanding debt like a credit card bill, it should be your first priority.

If you want to save it

If you want to put aside the money for a future cause, the best option is the retirement. Add your tax refunds into a retirement account and within a decade you would have 30 thousand dollars which can be invested in some dividend paying stocks. You can divide that money into stocks and bonds. Invest 60% in stocks and 40% in bonds.

You can add the money to your child’s college fund if your retirement fund is sourced by your employer. Choose a plan to save your money so that your child would have enough funds to have his degree. Choose the plan with low fee and the one that would help you save a lot more money. If you have a mortgage or a high interest loan, then it is very important to spend the money on it than saving for a future cause.

Dumb ways to spend your tax refund

You can even keep your refund idle in your bank account than indulge in any dumb spending. The dumb spending would include down payment for a car, frittering on things that have high degrading value or lending money to someone. Remember, it is not free money and it is your money. Also, don’t forget to spend a little on yourself, as the tax return is one of the many good things of the spring season.

Do not postpone any bill just to pay it off with the tax return check. There is no concrete time limit within which you would get back your money, and there would be a considerable delay between the tax filing and the tax return payment due to the processing.